Cryptocurrency: Is it the new thing?

Although not new in the financial circles across the worlds, cryptocurrency has gained traction recently due to Bitcoin's ever so high exchange rates. Currently as I type the price of 1 Bitcoin is 5.2 Lacks! So, the very first question that arises is- What exactly is a BITCOIN and why isn't everyone investing in it?

Cryptocurrencies have been existant for a while (like Ripple, Dogecoin and Bitcoin) are a not pulled out of thin air, these are generated with the help of advanced and really powerful computers. the amount of users and the available currency in the market decide the price (no brainer here!! Basically the supply-demand as we know it). A Bitcoin is the culmination of a fluid functioning of a society of a group of individuals; one which makes them and the other which buys them.

Bitcoin is possible because of cryptography, which takes place in a peer to peer network currently stretched around the globe. So bitcoin, unlike the tangible notes and coins we know of, is just a string of data in this network. Now the question arises as to what stops the fraud? The answer is ingenious since the network maintains a Ledger to mark all the entries and this global ledger is called the blockchain.

Bitocoin unlike the INR and Dollar isn't attached to a state or a country in any way; this makes it independent since it doesn't have an issuing authority or a regulatory body; how is it then maintained? Let me explain with an example-

If I were to send money to say, my mother (I am a good son :)) then I basically announce my transactions in the network and the people across the globe who maintain the ledger are keeping a track of it. Now, we all have heard the term MINERS... they are the same people who maintain the ledger for the network. These people voluntarily use high end computers to solve complicated hash functions to add their ledger having information regarding my transaction. Multiple ledgers help verify that the transaction is true and genuine. These ledgers from different people worldwide are called BLOCKS (blocks of information) and they form a CHAIN (chain of ledgers in the network), hence the name BLOCKCHAIN. Now, these people aren't doing a charity by keeping the bitcoin engine running, they are being paid for each block they add to the chain; the catch is, to get added their computers need to solve the hash functions before the other computers and this requires really expensive pieces of tech and electricity bills which run sky high. So, when these ledger keepers actually solve before the others it isn't short of striking gold, hence MINERS.

This decentralized system is not any lesser than a machine running perpetually and the blockchain is having a huge scope but when it comes to Bitcoin in general, is it profitable? The answer is yes, if we consider the historical data, but we should be aware of the risks as a Bitcoin's value is dependent upon many external factors across the world, rendering it volatile and susceptible to fluctuations.

As Mark Cuban says-

If you invest in a Bitcoin consider that money lost

Not that he means it isn't profitable, just that it is unpredictable in many ways. So my advice would be to do a thorough research and not invest more than 10% of your income in cryptocurrency at a time.